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Microsoft's Timing Couldn't Be Worse

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Last week, Microsoft (NASDAQ: MSFT  ) reported earnings that sent shares reeling, thanks in large part to a disheartening $900 million inventory charge related to the software giant's Surface RT tablets.

That's a troubling admission that the company was aiming too high with the device that represents Microsoft's biggest entry into first-party hardware. That includes both in terms of price and unit forecasts. At the initial price point of $500, it was going up against Apple's (NASDAQ: AAPL  ) iPad, and Microsoft had reportedly ordered more than 3 million of them. Over the first two quarters, it shipped 1.8 million, including the newer Surface Pro (which was not related to the inventory charge).

A couple of months ago, Microsoft launched an all-out anti-iPad ad campaign targeting Apple's flagship tablet. The company used the same marketing strategy that Apple had used against it years ago, playfully goading its rival and calling out its weaknesses. Microsoft has since released a series of other spots that highlight Surface's advantages.

No less than a day later, Microsoft put out another ad poking at the iPad; considering the inventory writedown, the timing couldn't be worse.

The first shot was actually quite clever, but the subsequent commercials have been less inspiring. In the latest, Microsoft calls out the lack of USB port, integrated kickstand, or keyboard accessory, and then follows up by comparing the $599 price tag to the Surface's recently reduced $349 price point, both for a 32 GB model.

Microsoft is getting more aggressive with taking shots at the iPad, suggesting it won't end well for Apple's tablet. This time, Microsoft is comparing the iPad directly to its Surface, while in prior ads it would compare the iPad to a tablet made by a third-party OEM such as ASUS or Dell.

Of course, Apple has never had a problem selling iPads and has never taken any inventory writedowns approaching $1 billion, but that's not something that Microsoft should be proud of.

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Read/Post Comments (4) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 20, 2013, at 11:02 PM, MrSmith210 wrote:

    Wasting time putting out negative ads against other companies only breeds negative results. This is one major reason I feel consumers are confused and unattracted to Microsoft hardware.

    MSFT is a horrendous investment and I don't understand ANYONE long this name from a growth perspective. Cash and dividend. That's it. But that will deplete over the years to come if they can't figure out how to sell hardware beyond the XBOX. We know their software is a dying breed as well.

    MSFT is the definition of dead money. They had their day. And it was a decade and then some ago.

  • Report this Comment On July 21, 2013, at 12:21 PM, DrGoldin wrote:

    I don't think there's anything wrong with an ad campaign highlighting the fact that the Ipad is overpriced.

    But it wouldn't make me want to invest in Microsoft.

  • Report this Comment On July 21, 2013, at 12:48 PM, decebalvs wrote:

    Yes, listen to MrSmith here. He knows everything about software development. He understands that the complexity of iPad games and nice websites is a few levels above the complexity of a Windows Server for example. He also knows that the programmers in Redmond, are simply going away. Their extensive experience in C++ and C# won't help them against industry veterans, such as java programmers.

  • Report this Comment On July 21, 2013, at 3:55 PM, kellenbmiller wrote:

    I like windows but they have a big problem with the tiles. Not the layout or the theme. But since Apple and Google have standardized the Icons look. People expect to see apps look a certain way. The tiles are hard to read into. You find yourself thinking they are all the same. That leads you to think that their is nothing more this OS has to offer.

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